who is willing to do this? three questions should be picked out from 6. shold follow essay format. no plagirism. very spesific in your answer. using your own words. i have attached the slides shown by the professor during the class so you can follow.

Week 5 Pol 223

Globalization and the Canadian State/NAFTA

Road Map

• National Policies • Globalization • CUFTA/NAFTA

National Policies

• National Policy #1 - Defensive Expansionism – 1867-1885

● Integration of former Br colonies into a new fed state with sufficient legislative powers to underwrite and direct development

● Subsuming and developing the vast western territories under the auspices of the fed state

● Constructing transcontinental transportation and communication links

● Implementing a protective tariff to encourage trade between the various units of the new federation and stimulate domestic manufacturing

National Policies

• National Policy #2 – Compensatory Liberalism

– Development of social welfare programs

– Implementation of Keynesian-inspired, demand management fiscal and monetary policies

– A commitment to a liberalized international trading regime, especially with the US

National Policies #3

• 1980’s – Market Liberalism – Hemispheric economic integration – Market driven development – Reducing the role of the state,

especially in the provision of social welfare

– privatization

Components of Canada’s National Policies

Componen ts

1st National Policy Defensive Expansioni sm

2nd National Policy Compensat ory Liberalism

3rd National Policy Market Liberalism

Industry Building

Tariffs GATT liberal trading order

CUFTA/NAFT A

Keynesianis m

Infrastructur e Building

Railways Free Market Policies – Liberalize, Privatize, Deregulate

Society Building

Immigration Social Welfare Net

Fiscal Restraint

Globalization • Largely attributed to increases in technology, lowering of trade

barriers, and the facilitation of the easy movement of capital • Multinational corporations began outgrowing national borders • Governments began putting global competitiveness over the

continuation of Keynesian econ policy and the social safety net – became more market oriented

– New Public Management – Privatizing and becoming closer to business – De-regulation – Neo-liberal rules embedded in international agreements such as NAFTA

and the WTO – Less constraints on corporations

Globalization • Diminished the ability of states to take action • Limits on going against the market in favour of the citizens

issues, demands, needs • McBride – “These restrictions on state actions may be particularly

significant on the semi-periphery, where state-centred policies aimed at achieving more autonomy, diversified development, and redistribution of incomes were common as a response to the influences of powerful core countries

• Trade off between sovereignty and potential access to larger markets Cdn approach

Globalization

• Included international agreements such as NAFTA, CUFTA, WTO

– Signalled an export-oriented strategy – Locked in neolib principles domestically –

increased policy making constraints

• McBride – not a new concept, internationalism

• Initial literature – demise of the nation-state? 2007 crisis

Instability of the 1970’s

• End of the Bretton Woods agreement • Oil price shocks • Stagflation • Low productivity

Instability of the 1970’s

• Pointed to end of the Keynesian approach and the notion that domestic and international economic policies were intimately related

• Could not insulate itself from global pressures • Decline of US hegemony required that Canada re-evaluate

special relationship with the US • Trudeau attempted to reassert fed primacy through NEP,

patriation of the Constitution, resource based industrial strategy, Western Development Fund – was not successful as a result of international and domestic forces

– Decline in world oil prices – Rising interest rates – Serious recession

The Relationship

• Clarkson - By 1960’s features of the US/Canada relationship – Will – Basic norms – Formal policy making institutions – Washington accepted tacit limits to the exercise over Canada of its

power – US corporate citizens enjoyed rights of access to Canadian

resources and markets – greater mobility of citizens – Lack of judicial process for solving issues – Enforcement of rules made possible by trust – Significant changes to the relationship were made only after

lengthy consultations with both sides – Ratification of this relationship took the form of both leaders

making ritualized references

Pre-CUFTA

• 1982 Standing Senate Committee on Foreign Affairs recommended Canada seek a free trade agreement with the US

• Trudeau response was sectoral free trade, capping fed transfers to the provs, and began liberalizing financial markets

• Established the McDonald Commission charged with suggesting “appropriate national goals and policies for economic development”

– Rejected economic nationalism – Endorsed bilateral free trade

Pre-CUFTA

• Cons campaign under Mulroney in 1984 focused on reducing the role of govt in the economy, balance the budget, promote global competitiveness – influenced by Thatcher and Reagan

• Liberalize, privatize, deregulate and downsize • Initially Cons were against free trade, by 1985 that changed

– influenced by change in attitude of the manufacturing sector towards free trade and the strong support of the Alberta and Que govts

Pre-CUFTA

• 1970’s decade of instability in most market based economies

• Trudeau reviews relationship with US and determines 3 options

– Status quo – Deeper integration – Diversification to achieve economic

independence

Pre-CUFTA

• Chose to diversify – Moved to discriminate in favour of

Canadian capital – Created FIRA – Foreign Investment

Review Agency – National Energy Program

Pre-CUFTA

• By the 1980’s – Trudeau started to consider commercial

policy as an alternative route to boost the economy

– Completed interdepartmental trade policy review which recommended several sectors to the US for consideration as candidates for managed free trade arrangements similar to the Auto Pact

Pre-CUFTA

• Canada-US Automotive Agreement - Auto Pact, 1965

– Continentally rationalized industry – Guaranteed a minimum level of Cdn production in

US-owned assembly plants, allowed for free trade in auto products

– 50% of each vehicle assembled in Canada had to be made in Canada

– One car was to be produced in Canada for each car sold in Canada

– Established an incentive to manufacturers to open parts production in Canada rather than US

Pre-CUFTA

• 1983 Progressive Conservative election campaign Brian Mulroney comes out against free trade

• Mulroney wins huge majority in 1984 – Michael Wilson becomes Finance Minister

● State’s role was to pursue internal equilibrium by attempting to manipulate aggregate demand

● Government should de-regulate the market so the economy could create jobs and growth

● Neocon opposition to Keynesianism – favoured combination of macroeconomic, industrial and trade policy

Pre-CUFTA

• Sept 4, 1985 – Royal Commission on the Economic Union and

Development Prospects for Canada ● Trade policy to play a central role in the economy ● trade liberalization would force companies to become

competitive with international rivals ● Access to global markets would create wealth allowing for

increased investment in technologies and further expansion ● Best way to free up the market was to abandon protectionism

and statism and to opt for global free trade

Pre-CUFTA

• October 1985 Mulroney writes Reagan requesting negotiations

• Reagan was hesitant – Economic hegemony was being challenged by the

resurgence of rival states in Europe and Asia – Favoured extending GATT (General Agreement on

Trade and Tariffs) to include investment, the sale of services, and intellectual property rights

– Finally decided to use bilateral negotiations with compliant partners as strategy – intended to ground rules for GATT talks and exert pressure to move process forward

Pre-CUFTA

• US/Canada negotiations began in 1986

– US targeted Cdn policies they found unacceptable

– Canada made concessions even before negotiations began

– US agreed to the creation of new dispute resolution mechanism – lasting legacy?

Pre-CUFTA

• 1984 Election – Contentious, mostly based on Turner

agreeing to Trudeau patronage appointments

– Did not overly focus on CUFTA – http://www.cbc.ca/archives/categories/p

olitics/elections/leaders-debates-1968- 2011-highlights/1984-leaders-debate-hig hlights.html

CUFTA

• Signed January 2, 1988 • Goal was to bring down trade barriers between

Canada and the US; • Allowed for free competition between Cdn and

American companies; • Allowed for much more investment between the

partners; • Created new dispute resolution mechanism; • Set foundation for future trade negotations

Free Trade Election - 1988

• Mulroney and Turner Part 2 • http://www.cbc.ca/archives/categories

/politics/elections/leaders-debates-1 968-2011-highlights/1988-leaders-deba te-highlights.html

Pre-NAFTA

• 1991 – Mulroney fears advantages gained under CUFTA would be undermined by US/Mexico trade negotiations

• Joined with US/Mexico to create an agreement on continental free trade

• CUFTA was used as the initial basis for the NAFTA agreement

NAFTA • Business Council on National Issues (BCNI) pivotal actor on free trade side –

unions and Council of Canadians key on the anti-free trade side • BCNI – 150 leading corps based in Canada pumped millions into the debate –

McBride – “It is here we must locate the social base of the neoliberal turn in Canadian politics. From the outset the BCNI had a clear set of “reforms” in mind for Canada. If favoured ‘ the free flow of goods, capital, services and people’ and proposed free trade with the United States as a strategy for restraining both the federal and provincial states’

NAFTA • Deepened CUFTA by expanding its institutional structure • Changed the dispute settlement mechanism • Altered the Auto Pact • Broadened the investment provisions coverage • Added capacity for foreign corporations to sue host

governments • Increased the revised trade rules’ limits on Cdn and Mexican

policies and reduced their effects on US sovereignty

NAFTA • Tariff reductions and prohibition of import and export controls • Detailed rules of origin • Constrains government efforts to make drug patents available

for general manufacture, gives corporations monopoly rights over their intellectual property so that they can profit from commodification of their knowledge

• Restricts Canada from benefiting from cheap energy – forbids fed or prov govts from pricing energy consumed by Cdn citizens below export price

– Even in crisis must share the same proportion of its energy production as it had in the preceding 3 years

NAFTA

• Gave up powers of foreign investment review and exempted indirect takeovers when another Cdn company bought a Cdn subsidiary of a foreign company

• Government procurement contracts over $50,000 US and construction contracts over $6.5 million had to be opened to bids from NAFTA companies

• Goal for Canada was to stop harassment costs that the US govt would impose on Cdn exporters under protectionist restrictions

– Wanted US to renounce anti-dumping actions – Comprehensive subsidy code

Effects of NAFTA

• NAFTA’s rules may constitute a constraint on Cdn sovereignty – supranational agent

• Increased integration of the North American economy forged by corps operating continentally without corresponding method of continental governance

• NAFTA featured minimal institutional deepening in the interest of maintaining maximal state sovereignty

• Created North American Free Trade Commission which had authority to make interpretations of NAFTA’s clauses that would be binding on agreements arbitration tribunals

Effects of NAFTA

• Three countries established a NAFTA office – Several dozen work groups, subgroups, and

subcommittees mostly focused on harmonization

• Two central agencies – North American Agreement on Labour Cooperation

(NAALC) – Commission for Labour Cooperation – North American Agreement of Environmental

Cooperation – Commission for Environmental Cooperation

Effects of NAFTA

• Agreement can be adjusted or ended with an act of Congress, each has 6 month termination ability

Chapter 11 • Introduced a mechanism for handling international trade

disputes – effectively constrains governmental capacity • Investor-state disputes go to arbitration before an international

panel operating by rules established under the World Bank or UN for settling international disputes between transnational companies

– Transparency becomes non-existent – in camera – Neutrality ends – plaintiff investor appoints one of 3 arbitrators – Judicial sovereignty falls by the wayside

Chapter 11

• Privatized process bypasses court system • US legal definitions predominate • Under Chpt 11 question became whether Canadian govt

could impose any restriction • Permitted private investors to take govts to binding

arbitration • Retained national treatment • Broadened the definition of investment to give rights to

investors contemplating an investment • Detailed a more comprehensive ban on performance

requirements provs could impose on Canada’s treatment of foreign investment from outside North America

Effects on Provs • NAFTA affected provs ability to manage their internal economies –

created centralization of policy • Obligations of NAFTA impeded on areas of provincial jurisdiction – e.g.

regulation of loans, mortgages, trust companies • Inclusion of govt services problematic – US service providers use

NAFTA’s corporate rights to challenge the public sector’s dominance in the prov’s provision of social services

• May have altered constitutional balance by forcing feds to ensure prov conformity – no constitutional mechanism

• Made role of Supreme Court unclear – had ruled under the Labour Conventions Act of 1937 that feds were prevented from implementing treaties in areas of prov jurisdiction

Effects on Provs

• Resulted in Agreement on Internal Trade (AIT) (1994)

– Sought to translate new international norms into domestic intergovernmental relations

– Mulroney then Chretien – goals ● Discipline fed/prov participants ● Gave economic policy negotiations a more familiar pattern ● All provs agreed to strict decision-making deadlines ● Created the Internal Trade Secretariat (ITS) ● Brought in neutral 3rd party arbitrator

AIT

• Economic union would enhanced through greater efficiency, accelerated productivity, increase interprovincial commerce

• New rules to constrain individual jurisdictions in their traditional use of policy instruments to promote local economic development – agreed to provincial treatment

• Dispute mechanism borrowed from NAFTA

Results of NAFTA • Using free trade policy in the 1980’s was a non-invasive,

covert way to precipitate industrial restructuring without the need for any overt action beyond economic agreements

• Canadian trade figures increased substantially since free trade era question is whether this also resulted in increased economic performance

• Tariff cuts motivated increased trade in previously heavily protected industries

• Some mitigation of the lack of Cdn value added products • Significant declines in industrial machinery, office equipment,

telecommunications, precision equipment and aircraft

Results of NAFTA

• Imports also increased where tariff cuts were greatest

• Corporate consolidation increased cross border trade within industries

• Both Canada and US increased imports from each other

• Manufacturing declined but service sector rose – service trade with US increased, with increased capacity increased with other countries as well

Results of NAFTA • Initial econ performance indicated decline – GDP 1980-89 2.9%,

1990-99 1.8% • Gap between US and Canada productivity increased – Canada lower • Increased economies of scale, easing of market restrictions, greater

efficiencies gained from corporate restructuring anticipated from integration were not initially achieved and did not reinvigorate industrial manufacturing although a recovery eventually did occur

• May have been a trade-off between those that won and those that lost under CUFTA/NAFTA

Results of NAFTA

• Decline in manufacturing with removal of protections – tariffs, resulted in effects on unemployment rate

– 1960-73 5% – 1974-79 7.2% – 1980-89 9.0% – 2000 6.8%

Results of NAFTA

• May have resulted in decline of per capita income

– 1960-79 3.4% growth – 1979-89 1.8% growth – 1989-96 .1% growth

– Free trade had not changed earnings except for lowering the wages of non-production workers – gains in productivity did not boost wages to the extent forecas

Shortcomings? • Clear that adjudicatory institutions overwhelmingly favour

market forces • Failed to put limits on harassment costs • US negotiators inserted Congress’s constitutional right to pass

new trade measures that could supersede NAFTA • NAFTA may have made the two existing bilateral relationships

more asymmetrical than they had been • Legal order has been altered by Parliament’s accepting legal

and regulatory changes over which it loses sovereignty • May have aided in locking in neocon/neolib agenda in Canada

Shortcomings?

• Aggravated federal – prov relationship – east/west ties were weakened in favour of north-south dynamic

• Interprovincial trade, which matched exports to the US in 1989, fell to half the volume of US exports by 1996

• Increased imports displaced domestic flows of durable consumer goods and processed foods

• Did not reduce inequalities within federation – some regions excelled others did not

Results of NAFTA

• Has insulated corporations against pressure from any of the three govts

• Erased national borders, affected corp strategy re: production

• Affected Cdn branch plant econ, now a warehousing operation?

• Corps can now compete with a widened, continental economic space

Results of NAFTA

• McBride – “In Canada, the push to free trade would serve both the material interests of the Canadian capitalist class and its political ambitions to refashion Canada along explicitly pro-market lines.”

• Has resulted in “quiet constitutionalism” the production of constitutional change without overtly engaging in constitutional reform

– Imposes liberal rules of behaviour on governments and other actors and denies them the ability to make choices outside that value framework

Results of NAFTA

• Has altered public authority 4 ways – Trends to executive dominance have

been reinforced – The pecking order of bureaucratic

agencies has been altered – Federal authorities have acquired a

supervisory role in areas of provincial jurisdiction

– Role of courts has shifted – gained and lost jurisdiction in certain areas

Results of NAFTA

• McBride – International agreements function to

constrain, limit, direct, and condition decision making in areas far removed from trade as traditionally understood

– This amounts to a constitutional change, interestingly and regrettably, the change in the capacity for action of government institutions, unlike other rounds of constitutional proposals, has largely escaped scholarly and public attention

Next Time

• Reading Break – Yippee!!! • Week 7 The Canadian Neoliberal

State